Earlier today, I was honored
to join Treasury Secretary Jacob Lew and Deputy Secretary Sarah Bloom Raskin to
unveil designs for the 2017 American Liberty Gold Coin.
The unveiling not only
marked a historic milestone for the allegorical Lady Liberty, who has been
featured on American coinage since the late 1790s, but also served to kick-off
the Mint’s 225th anniversary—a year-long public awareness campaign
about its mission, facilities and employees.
I am very proud of the fact
that the United States Mint is rooted in the Constitution. Our founding fathers
realized the critical need for our fledgling nation to have a respected
monetary system, and over the last 225 years, the Mint has never failed in its
mission to enable America’s growth and stability by protecting assets entrusted
to us and manufacturing coins and medals to facilitate national commerce.
We have chosen “Remembering our Past, Embracing
the Future” as the Mint’s theme for our 225th Anniversary year. This beautiful coin truly embodies that
theme. The coin demonstrates our roots
in the past through such traditional elements as the inscriptions United States
of America, Liberty, E Pluribus Unum and In God We Trust. We boldly look to the future by casting
Liberty in a new light, as an African-American woman wearing a crown of stars, looking
forward to ever brighter chapters in our Nation’s history book. The 2017
American Liberty Gold Coin is the first in a series of 24-karat gold coins the
United States Mint will issue biennially. These coins will feature designs that
depict an allegorical Liberty in a variety of contemporary forms including
designs representing Asian-Americans, Hispanic-Americans, and Indian-Americans
among others to reflect the cultural and ethnic diversity of the United States.​
2017 American Liberty Gold Coin obverse
(left) and reverse (right). (United States Mint Photos)
Rhett Jeppson is the Principal Deputy Director of the U.S. Mint.

Congress sent states hundreds of millions of dollars to fight an opioid crisis claiming more than 100 lives a day — money they've largely been unable to spend after a year.Mixed signals from the Trump administration on how to use the money and state challenges ramping up their efforts have left untouched more than three-quarters of the $500 million Congress set aside under the 21st Century Cures Act in late 2016.As President Donald Trump heads to hard-hit New Hampshire today to tout his plan to combat the crisis, the slow drip of dollars into communities hit hard by addiction has put state officials in a bind and frustrated addiction experts and some treatment organizations.“This is a total failure,” said Andrew Kolodny, former chief medical officer at Phoenix House and now a Brandeis University researcher, likening the situation to food and water “stuck in an airport somewhere, while people are starving to death.”The grants for opioid addiction and prevention efforts were part of a $1 billion commitment over two years authorized in the Cures Act, which then-President Barack Obama signed just before leaving office.But state officials were quickly caught in a dilemma: They were happy to receive new money, but it was guaranteed for only two years, making it difficult to get long-term commitments from health care providers and others to build programs and hire a workforce.Many of those trying to expand access to medication-assisted treatment, buy overdose reversal drugs and bolster recovery programs say they were hamstrung in their efforts to solve a magnifying public health emergency with a short-term program. They’re calling on Congress for a longer-term financial commitment."One-time money really changes the parameters of what you think you can fund," said Katie Marks, project director for the Kentucky Opioid Response Effort, where officials will receive $21 million in grants over two years. "Some of these programs are going to take a fair amount of development before they can sustain themselves."Congress is set to release the second $500 million tranche of aid soon, and weighing whether to extend the grants beyond two years while making other changes, according to aides in both parties.The funding is valuable to boost certain types of programs, but doesn’t come close to paying for aggressive treatment for those suffering from addiction, said Robin Parsons of the Fairbanks Alcohol and Drug Addiction Treatment Center in Indianapolis.“This isn’t going to go away in a couple years,” Parsons, the hospital’s chief clinical officer, said of the epidemic.Regina LaBelle, who served as chief of staff at the Office of National Drug Control Policy during the Obama administration, likens the states' challenge to “flying a plane while you’re building it ... They have to build infrastructure at the same time they have to get money out the door.”Many projects are just getting off the ground, even though the first year of the program ends April 30 — with officials expecting to request the money be carried over into the new year.Kentucky officials had spent nearly $2 million as of early this month, Marks said. They began finalizing contracts for roughly 30 projects in July, she said."It has been a challenge with that many contracts, and using a state procurement process and partnering with community agencies," said Allen Brenzel, clinical director for the Kentucky Department for Behavioral Health, Developmental and Intellectual Disabilities.Other states found workarounds to spend it faster. California legislators gave their health department new authority to quickly roll out contracts using the nearly $45 million the state will get annually, most of it to increase the use of medication-assisted treatment. The programs were up and running by last fall.Progress has been slower elsewhere.In New Hampshire, which had the nation's third-highest drug overdose fatality rate in 2016, a five-member council must approve state contracts exceeding $25,000. The first two grants weren't approved until late January."We don't want to spend 18 months building programs that sunset when the funding ends," said Julia Frew, who oversees a Dartmouth-Hitchcock Medical Center effort that got $2.8 million to expand medication-assisted treatment for pregnant women. "We're trying to think of sustainability as we go."In Indiana, which received about $11 million the first year, concerns about future funding led Aspire Indiana to not move ahead with a proposed expansion of residential substance abuse services, according to Matt Brooks, president of the Indiana Council of Community Mental Health Centers.There is no guarantee that SAMHSA grant funding will continue in the future," said Brooks.Federal officials say such spending delays are normal for new programs. The first four months of the state opioids grants were dedicated to setting up infrastructure, followed by a half year focused on delivering services, SAMHSA spokesperson Chris Garrett said. He said that states have spent just under a quarter of the $500 million Congress appropriated so far.But the start-up experience has underscored the need for greater clarity from the federal government. Last year, Ex-HHS Secretary Tom Price sent mixed signals about how much funding states would receive in round two and what it might be spent on. That rattled state officials, who worried that changes halfway through would require them to reapply and potentially delay projects.Congress and SAMHSA also went back and forth about whether to change the funding formula— it is based on a combination of population and total drug deaths, which left small states like West Virginia and New Hampshire with proportionately less money than big states that had lower mortality rates."We had to kind of wait for the green light that the second-year funding would be allocated to the same priorities," said Kentucky's Brenzel.State officials are now awaiting the second round of funding and hoping for more after that."My No. 1 ask" would be for them to continue the program as is, said Marlies Perez, chief of the California Department of Health Care Services Substance Use Disorder Compliance Division. "For them to come up with a whole new system? That would definitely add delays."Some in Congress are nonetheless examining possible tweaks. Sen. Tammy Baldwin (D-Wis.) and others have proposed broadening the funding targets to address additional substance use issues like methamphetamine, which has plagued her state.Other lawmakers, from states with the highest drug-related death rates, are pushing for more money, faster."How do we deal with small communities that don't have two nickels to rub up against each other to file a grant application?" said GOP Rep. David McKinley, whose home state of West Virginia has the highest overdose mortality rate in the country. "How can we streamline this so that it does get out?"Don Sapatkin contributed to this story.

In its new headquarters, NATO will deliver on its promise to create an eco-friendly workplace, using more of what is already available, recycling whenever we can and wasting as little as possible.
Structurally, the building has eight sloping wings that collect rainwater into reservoirs and can recycle this rainwater for use in toilets, cleaning and landscaping.
The new NATO HQ also has highly insulated walls and lots of windows to take maximum advantage of natural light, thereby saving on electricity.
Learn more about the new HQ: http://bit.ly/newnatohq
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Family life in Sheffield meets the brutal history of Bangladesh in Philip Hensher’s finest novel yetPhilip Hensher’s Ondaatje prize-winning Scenes from Early Life (2012) was a strange book. Ostensibly the lightly fictionalised story of his husband’s childhood, it was as much about the birth of a nation as the life of a man; or rather, perhaps, it showed how the two are often inextricable. To have been born in Bangladesh in 1970 was to be immersed in a struggle in which it was necessary to take sides. One of the themes that runs through Hensher’s latest novel, The Friendly Ones, is the staggering ignorance in Britain of the 1971 Bangladeshi genocide, and the book shows how the country’s brutal and divisive war with Pakistan left its traces down through generations, both at home and in the diasporic community.The Friendly Ones is a novel of reflections. It opens with a party: Nazia, Sharif and their children have moved into a well-to-do street in Sheffield. They have laid on a spread to celebrate their arrival – “pork pies and samosas and Cornish pasties and cake” – and members of the extended family are descending from all corners of England. A neighbour, Hilary Spinster, a recently retired doctor, is pruning the tree that leans over into Nazia and Sharif’s garden. The fence that separates the two families swiftly becomes freighted with meaning, particularly when tragedy threatens and Hilary leaps over it to save the day. Continue reading...

Nashville voters head to the polls on May 1st to decide the fate of a $9 billion transit referendum, the largest in city history, that would impose billions of dollars in higher taxes. The referendum would raise business and sales tax rates, in addition to hiking hotel and rental car excise taxes.

There is one way to assure that your supply chain is not impacted by the upcoming trade wars: bring all your manufacturing to the host nation and no longer rely on foreign suppliers.
That's precisely what Apple appears to be doing because in a move that may cause a dramatic shake-up among the key vendors to the world's biggest company, Bloomberg reports that Apple is designing and producing its own device displays for the first time, using a secret manufacturing facility near its Cupertino headquarter to make small numbers of the screens for testing purposes; if successful the numbers will grow far bigger.
In the latest indication that Tim Cook wants to eliminate any supply bottlenecks, and really, any suppliers - recall the historic crash of Dialog Semi which plunged the most in 16 years after a report that Apple would bring its power-management chip production in house - the tech giant is making a significant investment in the development of next-generation MicroLED screens, according to Bloomnerg sources. MicroLED screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry.
Since MicroLED screens are more difficult to produce than OLED displays, not to mention expensive, the company almost killed the project a year or so ago, but since then engineers have been making progress and the technology is now at an advanced stage, though consumers will probably have to wait a few years before seeing the results.
Bloomberg adds that, as noted above, this ambitious undertaking "is the latest example of Apple bringing the design of key components in-house." And while the company has designed chips powering its mobile devices for several years (see Dialog) its move into displays has the long-term potential to hurt a range of suppliers, from screen makers like Samsung Electronics Co., Japan Display Inc., Sharp Corp. and LG Display Co. to companies like Synaptics Inc. that produce chip-screen interfaces. It may also hurt Universal Display Corp., a leading developer of OLED technology.
As one would expect, the stocks of several key Apple suppliers have been whacked early in the Asian session, with Japan Display dropping as much as 4.4%, Sharp tumbling up to 3.3%, Samsung sliding 1.4% and BOE Technology Group down 2.7%.
Analysts, especially Apple bulls, are ecstatic at the opportunity: Ray Soneira, who runs screen tester DisplayMate Technologies, told Bloomberg tgat bringing the design in-house is a “golden opportunity” for Apple. “Everyone can buy an OLED or LCD screen,” he says. “But Apple could own MicroLED.”
Because arguably, customers care if the phone they can't afford at over $1,000 has OLED or MicroLed (spoiler alert: they don't, what they care about is the price tag).
And speaking of the price tag, it will only go up as mass producing the new screens will require new manufacturing equipment, and massive new sunk costs. Furthermore, by the time the technology is ready, something else might have supplanted it. Apple could run into insurmountable hurdles and abandon the project or push it back.
Somewhat bizarrely, Bloomberg downplays its own scoop by saying that "ultimately, Apple will likely outsource production of its new screen technology to minimize the risk of hurting its bottom line with manufacturing snafus. The California facility is too small for mass-production, but the company wants to keep the proprietary technology away from its partners as long as possible, one of the people says. “We put a lot of money into the facility,” this person says. "It’s big enough to get through the engineering builds [and] lets us keep everything in-house during the development stages."
Which is not good for the stock: any dollar that goes into silly R&D and projects is one less dollar that can be used to buyback AAPL stock.
Some more details on the not-so-secret project:
The secret initiative, code-named T159, is overseen by executive Lynn Youngs, an Apple veteran who helped develop touch screens for the original iPhone and iPad and now oversees iPhone and Apple Watch screen technology.
The 62,000-square-foot manufacturing facility, the first of its kind for Apple, is located on an otherwise unremarkable street in Santa Clara, California, a 15-minute drive from the Apple Park campus in Cupertino and near a few other unmarked Apple offices. There, about 300 engineers are designing and producing MicroLED screens for use in future products. The facility also has a special area for the intricate process of “growing” LEDs.
Another facility nearby houses technology that handles so-called LED transfers: the process of placing individual pixels into a MicroLED screen. Apple inherited the intellectual property for that process when it purchased startup LuxVue in 2014.
Apple’s screen development and manufacturing facility in Santa Clara, CaliforniaThe complexity of building a screen manufacturing facility meant it took Apple several months to get the California plant operational. Only in recent months have Apple engineers grown confident in their ability to eventually replace screens from Samsung and other suppliers.
But not for a long, long time.
As Bloomberg calculates, it’s unlikely that the technology will reach an iPhone for at least three to five years, the people say. While the smartphone is Apple’s cash cow, there is precedent for new screen technologies showing up in the Apple Watch first. When it was introduced in 2014, the Apple Watch had an OLED screen. The technology finally migrated to the iPhone X last year.
So until MicroLED is ready for the world to see, Apple will still - at least publicly - be all-in on OLED. The company plans to release a second OLED iPhone in the fall, a giant, 6.5-inch model, and is working to expand OLED production from Samsung to also include LG.
Until then, however, Apple has bigger problems: in a note released on Sunday, Nomura analyst Anne Lee was the latest to slash iPhoneX volume estimates to 12million / 8 million units from previous forecast of 18 million/13m "as many component suppliers have seen very low shipments since February, which could cause low plant capacity utilization rate and poor mix for 1H. She warned that 1Q results could still cast earnings downside risk vs. market expectations.
And with a market cap of over $900 billion, and a forecast that is priced to perfection, while Tim Cook may be hoping to distract from the overall woes plaguing the company which gambled on ultraexpensive phones and lost with MicroLED factories and other diversions, should demand for the company's top products continue to deteriorate, Apple's shareholders are about to be rudely introduced to "imperfection."

While meeting with special counsel Robert Mueller, fired FBI Deputy Director Andrew McCabe said that President Trump asked him "What was it like when your wife lost? ... So tell me, what was it like to lose?" reports Axios.
[I]n three or four interactions, President Trump was disparaging each time of his wife, Dr. Jill McCabe," a failed candidate for Virginia state Senate in 2015. -Axios
One of Trump's lawyers, John Dowd, replied "I am told that the P(resident) never made that statement according to two others who were present."
John DowdAs we reported yesterday, after having been fired Friday night - just 26 hours short of being eligible for his full pension for his involvement in leaking to the press and lying under oath, Axios reported that McCabe met with Mueller's team and turned over memos detailing interactions with President Trump.
Axios' source reveals that the memos include corroboration by McCabe of Comey's account of his own firing by Trump, as well as an account of at least one in-person meeting with Trump, which however considering McCabe was fired for perjury - among other things - may not carry quite as much weight.
A Bloomberg report from last week suggest Mueller is more or less finished probing whether or not Trump obstructued justice when he reportedly asked former FBI Director James Comey to end the investigation into incoming National Security Advisor Mike Flynn, and then fired Comey - however McCabe's firing will certainly add a new wrinkle to the probe.
Meanwhile, following the House Intelligence Committee finishing their Russia investigation and finding no evidence of collusion, an emboldened White House has become far more vocal over Mueller's investigation.
Trump attorney John Dowd told The Daily Beast "I pray that Acting [in this case] Attorney General Rosenstein will follow the brilliant and courageous example of the FBI Office of Professional Responsibility and Attorney General Jeff Sessions and bring an end to alleged Russia Collusion investigation manufactured by McCabe’s boss James Comey based upon a fraudulent and corrupt Dossier."
In an email to Axios, Dowd added "Just end it on the merits in light of recent revelations," adding "It’s nothing against Bob [Mueller] — I get along with Bob very well. ... Bob knows my view that there’s nothing there. ... On St. Patrick's Day, can't an old Marine make a prayer? No big deal."
Meanwhile, Trump's tweets on the matter have been increasingly antagonistic of the ongoing investigations - in one instance, apparently referring to a report we brought you last night suggesting that McCabe may have jeopardized former FBI Director James Comey after he said he was "authorized" to leak to the press - directly contradicting Comey's statement under oath that "he never leaked information, and never approved a leak."
Wow, watch Comey lie under oath to Senator G when asked “have you ever been an anonymous source...or known someone else to be an anonymous source...?” He said strongly “never, no.” He lied as shown clearly on @foxandfriends.
— Donald J. Trump (@realDonaldTrump) March 18, 2018
Trump then shifted to McCabe, saying he "never took notes when he was with me. I don't believe he made memos except to help his own agenda, probably at a later date. Same with lying James Comey. Can we call them Fake Memos?"
Spent very little time with Andrew McCabe, but he never took notes when he was with me. I don’t believe he made memos except to help his own agenda, probably at a later date. Same with lying James Comey. Can we call them Fake Memos?
— Donald J. Trump (@realDonaldTrump) March 18, 2018
Trump then set his sights on the Mueller probe - launching his most direct attack on the Special Counsel to date over having "13 hardened Democrats, some big Crooked Hillary supporters, and Zero Republicans?"
Why does the Mueller team have 13 hardened Democrats, some big Crooked Hillary supporters, and Zero Republicans? Another Dem recently added...does anyone think this is fair? And yet, there is NO COLLUSION!
— Donald J. Trump (@realDonaldTrump) March 18, 2018
The Mueller probe should never have been started in that there was no collusion and there was no crime. It was based on fraudulent activities and a Fake Dossier paid for by Crooked Hillary and the DNC, and improperly used in FISA COURT for surveillance of my campaign. WITCH HUNT!
— Donald J. Trump (@realDonaldTrump) March 18, 2018
Meanwhile, as Axios reports "One crucial variable in all this is Fox News. Trump feeds off the moods of his favorite hosts. If Sean Hannity and Judge Jeanine Pirro turn it up a notch, saying the deep state is out to get him and Mueller is out of control, there’s no telling what Trump will do."
In other words, keep a close eye on Fox News for the advance signal if market is about to crash, which it likely will do if and when Trump announces he is firing Mueller, unleashing hell.

One of this week’s milestones in the history of technology, the launch of Twitter, sheds light on the way we live now—deriving social status and enjoyment by playing games and gaining popularity on the Internet, including creating and spreading fake news.

Hillary Clinton had another embarrassing tumble in India while on her endless book tour...
Newsweek reports that Hillary “was staying at Umaid Bhawan Palace, the one-time residence of the former royal family of Jodhpur, when she slipped in the bath, DNA India reported.” Clinton reportedly had a hairline fracture on her wrist.
This would be at least Clinton’s second fall while abroad. She slipped on stairs while in India this week, needing the assistance of two men to walk down a flight of stairs.
As The Daily Caller notes, Hillary has a long history of falling down and having issues standing up in general.
In the 2016 campaign, she slipped on a flight of stairs in South Carolina.
She also infamously collapsed during a 9/11 memorial during the 2016 campaign.
GrrrGraphics' Ben Garrison visualizes Hillary's long list of 'falls'...
If you’re a member of the Deep State, you have a lifetime stay out of jail free card. You may commit any crime you like - steal from Haitians, murder witnesses, lie to Congress about classified information, accept ‘pay for play’ money while secretary of state, allow people to be murdered in Libya, be involved in child trafficking, or even rig an election - and no harm will ever come to you. Hillary always gets away with it.
...If Hillary continues to skate, then we’ll know for sure who still runs the show: The Deep State and the Shadow Government, otherwise known as “The Swamp.”
* * *
Cartoons that are Politically Incorrect? we got them! Support at Patreon

WRECKED: BEN SHAPIRO DESTROYS CNN’S BRIAN STELTER FOR DENYING MEDIA’S LIBERAL BIAS. “I don’t want CNN to disappear,” Shapiro exclaimed when explaining why he was tough on the media. “There is a difference between op-ed and journalism. It is why my critique of MSNBC sometimes is a lot less strident, I think, than my critique of […]

Authored by Gail Tverberg via Our Finite World blog,
It is impossible to tell the whole oil story, but perhaps I can offer a few insights regarding where we are today.
[1] We already seem to be back to the falling oil prices and refilling storage tanks scenario.
US crude oil stocks hit their low point on January 19, 2018 and have started to rise again. The amount of crude oil fill has averaged about 365,000 barrels per day since then. At the same time, prices of both Brent and WTI oil have fallen from their high points.
Figure 1. Average weekly spot Brent oil prices from EIA website, with circle pointing to recent downtick in prices.
Many people believe that the oil problem, when it hits, will be running out of oil. People with such a belief interpret a glut of oil to mean that we are still very far from any limit.
[2] An alternative story to running out of oil is that the economy is a self-organized system, operating under the laws of physics. With this story, too little demand for oil is as likely an outcome as a shortage of oil.
Oil and energy products are used to create everything, even jobs. If all humans have is energy from the sun, plus the energy that all animals have, then humans would be much more like chimpanzees. All humans would be able to do is gather plant food and catch a few easy-to-catch animals (earthworms and crickets, for example). They certainly could not extract oil or find uses for it.
It takes a self-organized economy to support the extraction and sale of energy products. We need a complex web that includes:
Equipment to extract the oil
Training for engineers and other workers
Devices that use oil, such as vehicles, farm equipment, road paving equipment
A financial system to enable transactions to purchase oil
Buyers with jobs that pay well enough that they can afford to buy goods made with oil
The things that go wrong with this economy can be on the buyers’ end of the economy. Buyers can have jobs, but these jobs may not pay well enough for the buyers to afford the output of the economy. A falling share of the population may be able to afford cars, for example.
[3] It is possible that a recent rapid increase in oil supply is contributing to the current mismatch between supply and demand.
Data of the US Energy Information Administration indicates that US oil supply has recently begun to surge. It is not just crude oil production that is higher. Natural gas liquid production is higher as well. As a result, Total Liquids production is reported to have been more than 16 million barrels per day in November 2017.
Figure 2. US Liquids Production, based on International Energy Data provided by the US EIA.
Oil production of the rest of the world has been relatively flat, as planned.
Figure 3. World excluding the US oil production by type, based on EIA International Energy data through November 2017.
Total world production, combining the amounts on Figures 2 and 3, set a new record of 99.1 million barrels of oil per day for November 2017, based on EIA data. This level is above the November 2016 level, which was the previous record at 98.9 million barrels per day.
At this high level of production, it is not surprising that the economy cannot absorb the full amount of extra supply.
There are also a number of issues that affect buyers’ demand for oil.
[4] The percentage of US residents who can afford to buy a new automobile or light truck seems to be falling over time.
If we look at the number of autos and trucks sold in the US, per 1000 population, we see a pattern of falling humps, as a smaller and smaller share of the population can afford a new car or light truck, each year. The big drops occur during the gray recessionary periods marked on the chart.
Figure 4. Figure showing US Passenger Cars and Light Trucks Purchased per Year per 1000 Population. Original graph by FRED (Federal Reserve of St. Louis). Retitled by author, because units were confusing on original chart.
The first peak came in 1978, at 67.3 units. The second, slightly lower peak came in 1986, at 66.7. The third peak came in 2000 at 61.5 units. The fourth peak came in 2015, at 51.6 units. Early 2018 amounts suggest that the trend in units sold per 1000 population will continue its downward trend.
Part of what is happening is that vehicles are becoming longer-lasting, so that there is not as much need to buy new cars frequently. But having a short-lived, cheap car has an advantage, if it makes cars available to a larger percentage of the total population. With a vehicle, a person has a much better ability to participate in the US workforce. US Labor Force Participation Rates peaked in about the year 2000, which is about the time of the third peak in affordability.
Figure 5. US Labor Force Participation Rate. Chart by FRED (Federal Reserve of St. Louis).
[5] There was a steep rise in the cost of auto ownership in the 1995- 2008 period. This has since fallen back, but the cost is still high relative to the wages of many workers.
One estimate of the cost of auto ownership is the reimbursement rate that the US government allows businesses to pay workers who use their own cars for company business.
Figure 6. Auto reimbursement rates as compiled on this list. Amounts shown on “As Stated” basis, and also at the 2017 cost level, based on CPI Urban.
These costs peaked about 2008 and were reflected in high reimbursement rates for 2009 as well. More recently, buyers of cars have been helped by longer term loans and ultra-low interest rates. If interest rates rise at all, the share of people buying or leasing new vehicles can be expected to fall further from the level shown on Figure 4.
[6] Building homes also requires oil. There has been a sharp drop in US home building, both on an absolute basis, and on a per capita basis, since 2008.
Figure 7. US Housing Units Completed, related to US population. Population from Census Bureau; population from UN 2017 population summary.
Building homes is part of oil demand. It takes oil to transport all of the materials used (lumber, siding, wiring, pipes, appliances) to the place where the house will be built. Furthermore, many of the materials used in building a home are produced using petroleum products.
The number of homes built depends on the number of new households that can afford a separate place to live. The low level of building makes it look as if the economy is still seeing a pattern of young adults living with their parents much longer than in the past. If buildings are to be replaced every 75 years, my calculation suggests that about 6 housing units per 1000 residents need to be built each year. About 2.5 units per thousand are needed, just to keep up with rising population, if upgrading and remodeling can be done almost indefinitely.
The fact that there is little home building reduces the number of jobs available in the building industry. The lack of jobs in this industry helps hold down the demand for oil, because these workers would use their wages to buy goods for themselves, such as food and vehicles. Food is grown and transported using vehicles powered by oil.
The lack of home building also contributes to the nation’s homelessness problem. If there were plenty of inexpensive apartments, there would be fewer homeless people.
[7] There is no longer an oil price at which both oil exporters and oil importers are satisfied. Oil prices today are too low for oil exporters.
I started writing about oil producers complaining that oil prices were too low in early 2014. At that time, oil companies were looking back at prices of over $100 per barrel in 2013. They were saying that $100+ prices were too low to provide adequate funds for reinvestment in new fields. Now prices are in the $65 range, which is even farther below the desired level.
Oil exporters are especially unhappy about today’s low prices, because they need high prices in order to collect needed tax revenue. This is why OPEC members and Russia have been holding back production. The plan is to deplete the glut of oil in storage, and thus get prices up.
It is not at all clear, however, that consumers in oil importing countries can really withstand higher prices. The fact that Brent oil prices could only stay above $70 per barrel for one week on Figure 2 (in the red circle), suggests that consumers in major oil importing countries cannot really withstand oil prices at this high level. I have observed previously that a sustainable price, without adding a huge amount of debt each year, is only about $20 per barrel.
[8] If we analyze vehicle purchases by country, we can see that low oil prices since 2014 seem to be helping major oil importers but are hurting Tier 2 countries that are commodity-dependent.
Figure 8. New vehicles (private passenger and commercial combined) purchased per capita for selected groupings of countries. Amounts shown are from OICA estimates by country.
In this chart, the grouping of Advanced Economies includes:
USA
Europe
Japan
Canada
Australia
For this grouping, growth in auto sales is again rising, but has not regained its prior level. This is somewhat similar to the indications in Figure 4, for the US only, looking at cars and light trucks. The main difference is in the last two years. Changes in currency relativities may be helping recent vehicle sales for the other countries in the grouping.
On this chart, the Tier 2 grouping includes:
Brazil
Russia
South Africa
South Korea
Malaysia
Mexico
This group includes several oil and other resource dependent countries. South Korea is perhaps more like the industrial countries in the first grouping. This grouping shows a downturn in the purchasing of vehicles in the last three years, when commodity prices have been depressed. If oil prices were higher, this group would probably be buying more vehicles.
Figure 8 shows that China’s auto sales have been growing rapidly. In fact, China has surpassed the Tier 2 average in per capita sales. In the past year, China’s growth in auto sales has flattened. But with China’s huge population, the absolute number of vehicles sold is still very high: 29.1 million vehicles, compared to 17.6 million for the United States, and compared to 20.9 million for Europe.
India and the Rest of the World account for surprisingly few vehicles sold. On Figure 8, their lines overlap at the bottom of the chart.
[9] The push toward raising interest rates and selling QE securities will tend to reduce oil prices and add to the oil glut.
I wrote about some of the issues involved in Raising Interest Rates Is Like Starting a Fission Chain Reaction. When interest rates are higher, economies are pushed in the direction of recession. All kinds of discretionary spending are reduced. Use of oil will almost certainly be reduced. This could lower oil prices significantly, as it did in 2008 (Figure 1).
[10] To a significant extent, China has been helping hold up world oil consumption, with its rapidly growing economy. It is hitting headwinds now, however.
The International Monetary Fund recently showed an exhibit indicating how China’s debt is growing very rapidly, but its growth in output is slowing. The combination could very easily lead to a credit crisis.
Figure 9. Exhibit from IMF Working Paper called Credit Booms: Is China Different?
Now, the rest of the world depends on China for many imported goods. If China should have problems, it would indirectly affect oil demand elsewhere as well.
Even China’s recent ban on importing certain types of materials for recycling can be expected to have an adverse impact on oil demand. Very often, if a container is sent from China to the US or to Europe, there will be no exported goods to send back to China, except for material for recycling. If China refuses to take recycling, containers will need to be returned empty.
Recycling generally needs to be subsidized. Part of what this subsidy is used for is to pay the cost of shipping material to be recycled to China. If China does not take the recycling, this payment for shipping materials in the otherwise-empty containers will not be made. The shipping company will need to charge exporters more for the one-way trip, if the shipping company is to be profitable. This higher cost, by itself, is a deterrent to trade. In many ways, the higher shipping cost is like a tariff.
[11] Conclusion.
My expectation is that the general direction of oil prices is likely downward, especially if interest rates rise. A major financial disruption of any kind would have a similar effect. Gluts of oil can be expected with lower prices.
Many groups, including the IEA, have been warning about oil shortages because of inadequate investment in new production. Oil shortages, and energy shortages in general, have a multitude of adverse impacts on economies. One of them is loss of jobs, because jobs require the use of energy, for example, to deliver goods in a truck. If many more people are unemployed, there is less demand for oil.
Thus, it is not at all clear that a shortage of oil leads to high prices; it may very well lead to lower prices. Many people are confused about this issue, because the word demand gives a misleading impression of the mechanism involved. Lack of demand comes from part of the population not being able to afford cars and homes. It also comes from cutbacks in government spending and from failing businesses. In an interconnected system, even failing banks tend to reduce oil demand.
Another adverse impact of oil and energy shortages tends to be fighting and wars. The fact that the US seems to be raising its energy production, in apparent disregard for countries that have been trying to cut back, is likely to make some oil exporting countries quite angry. It could sow the seeds for another war.
Economists do not seem to understand that GDP growth rates don’t tell very much about the well-being of individual citizens in an economy. A major issue is wage disparity. If there are many very low wage people, there is likely to be downward pressure on the sale of automobiles, and on the purchase of petroleum products. Economists are likely to think everything is fine, up until a major crisis occurs.